Australian EconomyGlobal Macro

Emerging markets’ (and our) broken business model

David Llewellyn-Smith
Thursday 3 December 2015
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From Citi:

Emerging economies’ growth prospects look damaged in several respects. The central fact facing EM is the negative external shock that results from weak global trade growth and the collapse of Chinese import growth. This brings to an irreversible end the period of rapid, investment-led Chinese growth and strong global trade growth which had supplied EM with a once-in-a-generation positive external shock during the years between 2002 and 2013.

Fiscal policy is tight across EM because private capital markets seem quite intolerant of rising public debt levels in EM (note Brazil’s fate). Even in countries that are actively trying to loosen fiscal policy — Indonesia, or Korea, for example — the loosening is quite modest.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.